Selling off on Wall Street raises concerns about a US market downturn.
Stock markets, which had reached record levels, reversed course during trading after Donald Trump announced tariffs against China.
(Reuters) — Investor concerns that Wall Street's record-breaking stock market rally was about to lose steam gained prominence on Friday, following the return of tariffs as a risk factor for the market.
US stock markets, which had hit record highs midweek, reversed course during trading after President Donald Trump again threatened to raise tariffs on China. Investors fear that a potential trade confrontation between the world's two largest economies could mark the end of the historic winning streak in US stocks.
Trump, who is scheduled to meet with Chinese President Xi Jinping in about three weeks in South Korea, questioned whether there was any point in holding the meeting and complained on social media about what he called China's plans to "hold the global economy hostage," after Beijing dramatically expanded its export controls on rare earth elements on Thursday.
Late Friday, after the official close of trading on Wall Street, Trump announced he would impose an additional 100% tariff on Chinese imports starting November 1st, as well as export controls on critical software produced in the U.S. The Republican president said he had not canceled his meeting with Xi, but his tariff threats sent shares of major companies tumbling in the market.
Shares of Nvidia, Tesla, Amazon.com, and Advanced Micro Devices (AMD) fell more than 2% after the market closed.
Tariffs are crashing the market.
During regular trading, New York stock exchanges had already registered a sharp decline. The Dow Jones Industrial Average fell 1,90%, the S&P 500 dropped 2,71%, and the Nasdaq Composite lost 3,56% on the day.
The S&P 500 and Nasdaq experienced their largest daily percentage declines since April 10.
The widespread sell-off has reignited fears that high stock valuations, fueled by enthusiasm surrounding artificial intelligence (AI), could lead to a significant correction.
On Thursday, the S&P 500 and Nasdaq reached new records, accumulating gains of about 11% and 15% in 2025, respectively. The Dow Jones has gained approximately 7% this year. The high valuations rekindled memories of the dot-com bubble of the late 1990s, which burst in 2000.
JPMorgan Chase CEO Jamie Dimon warned in an interview with the BBC on Wednesday about the increased risk of a significant correction on Wall Street in the next six months to two years.
“With stocks at such high valuation levels, this drop shows signs of nervousness,” said Gene Goldman, chief investment officer at Cetera Investment Management. “Everything is priced to perfection, so uncertainty increases market nervousness. All of this adds uncertainty to economic growth.”
In April, Trump's announcement of what he called "Liberation Day tariffs" surprised markets and triggered a rush among investors, leading S&P 500 companies to lose $2,4 trillion in combined market value.
Still, some analysts believe that US-China trade tensions are unlikely to significantly alter the market's trajectory, with AI remaining the primary driver of price increases.
“It’s definitely an important issue and may warrant a correction, but I don’t see it disrupting the AI trend, which has been driving the market,” said James St. Aubin, chief investment officer at Ocean Park Asset Management.
